Will China's Growth Be Maintained by Government Stimulus Alone?

China’s economy is continuing to grow despite the global recession, helped by a massive government stimulus package of $585 billion. But doubts remain whether such strong growth can be sustained by public spending alone. Al Jazeera’s Melissa Chan reports from Inner Mongolia, where a whole town built with government money is standing empty.

Source: YouTube, November 10, 2009.

Comments

[HaavBline:]

I wouldn't mind owning a small piece of the New Ordos and wait for people to move in eventually. In fact, the OLD Ordos dosen't look so bad either.

Nov 15 05:17 PM

[Mad Hedge F...:]

cio I have long sat beside the table of Mckinsey & Co., the best management consulting company in Asia, hoping to catch some crumbs of wisdom. So I jumped at the chance to have breakfast with Shanghai based Worldwide Managing Director Dominic Barton when he passed through San Francisco visiting clients. These are usually sedentary affairs, but Dominic spit out fascinating statistics so fast I had to write furiously to keep up, sadly letting my bacon and eggs grow cold and congeal. Asia has accounted for 50% of world GDP for most of human history. It dipped down to only 10% over the last two centuries, but is now on the way back up. That implies that China’s GDP will triple relative to our own from current levels. A $500 billion infrastructure oriented stimulus package enabled the Middle Kingdom to recover faster from the Great Recession than the West, and if this doesn’t work, they have another $500 billion package sitting on the shelf. But with GDP of only $4.3 trillion today, don’t count on China bailing out our $14.4 trillion economy. China is trying to free itself from an overdependence on exports by creating a domestic demand driven economy. The result will be 900 million Asians joining the global middle class who are all going to want cell phones, PC’s, and to live in big cities. Asia has a huge edge over the West with a very pro growth demographic pyramid. China needs to spend a further $2 trillion in infrastructure spending, and a new 75 story skyscraper is going up there every three hours! Some 1,000 years ago, the Silk Road was the world’s major trade route, and today intra Asian trade exceeds trade with the West. The commodity boom will accelerate as China withdraws supplies from the market for its own consumption, as it has already done with the rare earths. Climate change is going to become a contentious political issue, with per capita carbon emission at 19 tons in the US, compared to only 4.6 tons in China, but with all of the new growth coming from the later. Protectionism, pandemics, huge food and water shortages, and rising income inequality are other threats to growth. To me this all adds up to big core longs in China (FXI), commodities (DBC) and the 2X (DYY), food (DBA), and water (PHO). A quick Egg McMuffin next door filled my other needs.

Nov 15 06:18 PM

[Philly Jim:]

Could just be punishment for political arrangements Mongolia has with the U.S..

I believe this holiday shopping season in the U.S. could foretell the world's economic future. Asia has definitely done well with access to western technology over the past two decades; but, President Obama is right, East Asians really must figure out how to proceed without depending so much on exports to a failing society. A scenario which could soon unfold is that the ASEAN nations adopt a single E.U. style currency; China floats theirs, and American politicians get to save their skins by creating low-tech manufacturing jobs with a weak dollar. So, university costs must become more prohibitive, public education must continue to fail, access to credit must cease, and culture must continue to decline in order to prepare American youth for their future.

Nov 15 11:35 PM

[W.D.:]

The talk that I hear about rural China among those who I know visit there regularly is of extreme poverty; children and other family members who are nude in their homes and villages because another member of the family had to use the one good dress or pair of pants to go to town. If GDP were keeping up with population growth this certainly would not be happening.

Nov 22 07:43 PM